Alcatel Router Revenues Surge

(NYSE: ALA; Paris: CGEP:PA) has some numbers to back up the success it's claiming in edge routing, as the company plans to announce today that its market share surged in the third quarter.

Figures from Synergy Research Group Inc. show Alcatel's 7750 and 7450 models collected $88.8 million in revenues during the third quarter, up from roughly $35 million in the second quarter.

Yes, sales more than doubled in three months.

"That shocked a lot of people," says Ray Mota, the Synergy analyst behind the report. Mota queried some major carriers, though, and he says they're backing up the numbers.

"It's not a spike," asserts Basil Alwan, president of Alcatel's IP division. "This was the decisive quarter to the point where we are a head-on challenger" to (Nasdaq: CSCO) and (Nasdaq: JNPR), he says.

What has Alcatel particularly jazzed is that it took second place in Synergy's "IP edge aggregation routing" category, with 23.6 percent market share in the third quarter -- surpassing Juniper's 19.7 percent but still trailing Cisco's 45.9 percent. (See Alcatel Seizes #2 Position.) Alcatel's IP edge routing market share stood at just 3.1 percent after the first quarter of 2005.

But Juniper notes some extenuating circumstances. In the third quarter, Juniper's M7i and M10i routers were taken out of the service provider category and into the high-end enterprise category. So Alcatel's bump in revenues was accompanied by a decline in what Juniper was reporting: "We moved a substantial amount of revenue out of that category," a Juniper spokeswoman says.

She notes that Synergy still ranks Juniper second in all service provider edge routing, a superset of the IP edge category. Service provider edge routing in the third quarter was led by Cisco with a 48 percent share, followed by Juniper's 27 percent and Alcatel at roughly 14 percent, she says.

Note, also, that the numbers can be sliced up any number of ways. Alcatel's 7450 is an Ethernet box lacking full IP routing functionality. So some might argue it's not suitable for any "IP" category, although it's often sold in tandem with the 7750.

Even with such caveats, the numbers suggest Alcatel's IP division, launched after the TiMetra acquisition, has kicked into gear. Alwan claims the 7750 and 7450 have racked up 90 customers, 50 of them announced, with wins including (NYSE: BT; London: BTA), (NYSE: CHA), and (NYSE: SBC). (See Alcatel Picked for BT's 21CN, Alcatel Wins China Telecom Deal, and Scaling IPTV: Progress at SBC .)

Alcatel and Redback Networks Inc. (Nasdaq: RBAK) both appear to be on the rise in the broadband edge, says Heavy Reading analyst Rick Thompson. (See How Redback Won BellSouth.) Alcatel's port density and the integration of policy management have helped it in the video market, in particular, he notes.

Alcatel's recent strength in IPTV wins might have been a factor in Cisco's decision to acquire Scientific-Atlanta Inc. (NYSE: SFA), a move that could boost Cisco's prospects in service-provider video. (See Sci-Atlanta: Cisco's IPTV Lifeline?.) But Alcatel officials note that triple play wins account for only half their router revenues, implying the 7750 has proven attractive in normal routing cases as well.

Alcatel may have to work hard to maintain its presence in the IP edge. "That space is extremely challenging," Mota says. "They have to stay innovative, like Juniper in its earlier days."

Alcatel is trying. The company has been adding software features to the platforms and has increased Layer 2 support on the 7750. (See Alcatel Adds to MSE , Alcatel Enhances IP Tech, and Alcatel Taps Layer 2.)

— Craig Matsumoto, Senior Editor, Light Reading

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materialgirl 12/5/2012 | 2:51:52 AM
re: Alcatel Router Revenues Surge Here is a shot from outer space on market segmentation. Service providers want a cheap, fast, network that is simple to manage. This implies using switches. However, fixed routes get hard to manage as they must be changed manually over time as traffic patterns change. Automatically flexible routes, via routers, are easy to manage, but expensive in that the processing required in the box gets costly.

So, what they want is the "right" mix of cheap forwarding, with easy-to-manage routes. By definition, this seems like a hybrid beast.
konafella 12/5/2012 | 2:51:53 AM
re: Alcatel Router Revenues Surge So I would summarize this thread with two conclusions:

1) everyone has their own definition of a router vs a switch, and GMPLS and MPLS L2 PE capabilities clearly confuse the issues further.

2) most agree that 7450 deserves classification as a router

So what about the Alcatel 7250? Is it also a router?

douggreen 12/5/2012 | 2:51:58 AM
re: Alcatel Router Revenues Surge Mark,

So, how about a crack at a reasonable set of market segments for routers and switches defined by application (network type, SP business model, network location)? To be useful, it has to be granular enough, but not contain too many categories.

I could do it for transport equipment, but you are much better suited to do it for routers. Care to give it a try?
Mark Seery 12/5/2012 | 2:51:59 AM
re: Alcatel Router Revenues Surge Doug,

please see my previous comments on segmenting by application.
douggreen 12/5/2012 | 2:51:59 AM
re: Alcatel Router Revenues Surge Mark,

As I have argued many times before, while segmenting markets by technolgy can be a useful market segmentations basically skip the one segmentation that makes the most sense: Segmentation by application. These are products that actually compete for each other for a certain type of business, regardless of their underlying technology.

I first examined this in an article in XChange magazine 5 years ago (when the market was more complex, with BLECs, CLECs, etc.). If you are really bored, here is the link...


This is not usually done because, although it is a lot more useful, it is hard to do and requires a knowledge of the various carrier network architectures, and even their business models. In my experience, this is just too much to ask of most of the people who do market analysis.

So, I really don't care much about the switch/router debate unless it is put into the context of a specific application space.

Mark Seery 12/5/2012 | 2:52:00 AM
re: Alcatel Router Revenues Surge my last thoughts on this subject............

extensions vs definitions:

802.1q is not the definition of what an ethernet switch is, it is an extension to what the definition of what an ethernet switch is.

likewise, VPLS is not the definition of what an IP router is, it is an extension to what the definitin of what a router is.

just like you could implement 802.1q on a non Ethernet switched network, you could implement VPLS on something that is not a IPv4 router (and that has been done).

however, at the end of the day, the clear intent for MPLS was that it be an extension to what the definition of what a router is, and the clear intent of the VPLS working group is that a PE is "commonly an edge router".

that VPLS implements a layer 2 switching function (by some people's definition of switching) does not make the platform any less of a router. it also does not make the platform an Ethernet switch. To the best of my knowledge, the IEEE has never been particularly comfortable with what essentially amounts to a half-bridge implementation, and technically virtualizing the bridge function over a network like this, does not meet the IEEE definition of what a bridge is.

whether the underlying router that supports a VPLS meets the needs of any buyer, is a decision for the buyer to make and has nothing to do with whether something is technically a router or not.
Mark Seery 12/5/2012 | 2:52:00 AM
re: Alcatel Router Revenues Surge TMC1,

The use of global vs local addresses as a distinction between routing vs switching is a derivitive of the difference between connectionless and connection-oriented, i.e. in a truly connectionless network you can take a packet out the network and inject it back anywhere else in the network and it will find its way to the destination. this is one defintion of the difference between routing and switching, though as you say clearly not shared by every one here.........
tmc1 12/5/2012 | 2:52:00 AM
re: Alcatel Router Revenues Surge Desi,

You touch on something i was going to mention that i learned in my career and helps to keep routing vs. switching clear. i did not mention because it seems that most of the people here would confuse the issure but global vs. local addressing has always been a key difference between routing and switching as i have learned it.

i was taught/learned that when you are just looking up and modifying local L2 headers in the cell/frame then it is switching. when you are required to do a lookup against a globally unique address database then it is routing. FR DLCIs and ATM PVCs are only unique locally, MAC addrs are more complicated but could be construed this way because different VLANs can have the exact same MAC addrs with no problem as can multiple broadcast domains within the same network so they are only unique to broadcast domain. MPLS labels are another example of this - only locally unique to the node.

Anything where routing is involved is globally unique such as IP addrs, IPX addrs. If two devices exist globally with the same # it is a problem. Remember non-routable protocols were those without unique L3 addressing such as SNA and Netbios and they had to be bridged everywhere. This along with the design and architecture has always allowed me to keep routing and switching pretty well separated but an mpls router can do both just like an L3 switch can do both. These products do seem to blur the boundry but i have no problem calling one a router than can switch mpls and the other an L2 switch that can do some routing.
Mark Seery 12/5/2012 | 2:52:00 AM
re: Alcatel Router Revenues Surge desi,

1) anyone has the right to say that because a router does not support multicast, it does not meet there requirements as a router, it is of course still a router.

2) you suggested there was such a thing as "IP routing protocols" and that any product that uses them is an IPv4 router, which is clearly not true. the fact that you don't care that a control plane uses a data plane (and this has nothing to do with inline) suggests you don't fully appreciate how irrelevant the control plane protocol is to the data plane - specifically in the case of MPLS where an additional control plane protocol has to be used to make it work (or extensions to a protocol in the case of BGP4 label distribution).

3) some forms of LDP-based MPLS looks very much like hop-by-hop forwarding, there is not a lot of confusion about that as far as I know.

A product that does not have a IPv4 data plane and uses GMPLS to establish wavelengths is not a IPv4 router (calling it a router is throwing a blanket over something to try and make a point). Likewise, a product that uses an IP+MPLS data plane to set up LSPs is not necessarily a IPv4 router (though usually it is) - but you should not from a technical perspective be insisting that it is. There are examples on the market where it is not.

If PNNI SVCs are routing then so are PVCs. Please consider the difference between a management plane, a control plane, and a data plane. You are referring to the difference between something that is dynamic and something that is static (by a subjective view of what is dynamic - a management plane could be used to make something dynamic, though that is probably not a great idea). As discussed widely in this thread, most view the diffrence between switching and routing in a different way than what you have suggested (even if I would tend to disagree with these views).

I would agree there are many interpretations of the word routing, and as an example some of the other protocols you lists were considered by some not to be routable.

flyingsausage 12/5/2012 | 2:52:01 AM
re: Alcatel Router Revenues Surge whatever terminologh & regilious arguments we may discuss for years,
the 7450 is anyway much better than a router, or a simple Ethernet switch, just play with it in your lab and you'll understand.
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